You are thinking about investing in stock in a company who paid a dividend of $10 this year and whose dividends you expect to grow at 3 percent a year. The risk-free rate is 2 percent and you require a risk premium of 5 percent. If the price of the stock in the market is $200 a share, should you buy it?

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No

Yes

, using the dividend-discount model, you are willing to pay up to

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$240

$258

$180

per share.